Gentles’ Easter

Celebrated the week after Easter, Gentles’ Easter is widely considered the most important holiday of the year by many Moldovans. This year it fell on the 19th and 20th of April, when cemeteries in all the towns, cities and villages of Moldova are coming alive with people laying tables and spending a full day with the family and the community eating and drinking among the graves.

The Gentles are mythical creatures from in pre-Christian times. According to folklore they are incapable of evil, and by commemorating the dead in an optimist way, living humans grow closer to the immaculate moral condition of the Gentles.

Hampers of incense, food and drink are prepared in advance and just before noon, you will find most citizens of the country dressed for a party and heading to their local cemetery to commemorate their dead in a way that is unique to this part of the world.

A colourful and joyful affair, it involves the exchange of small gifts to be placed on the tombs of loved ones. More gifts – cakes, sweets, food and bottles of wine are placed on a large table inside the churchyard, along with prayer intentions and small sums of money. The priest in his festive garb and joined by a choir performs a blessing upon the contents of the table thus preparing them to be enjoyed by the dead.

Drops of hallowed wine are poured on graves and glasses are shared between the living. Each family have a table by the resting place of one of their own. They bring the best spread and the best home-coked food to honour the departed. A feast ensues. Wherever they are in the world, Moldovans will do their best to attend Gentles’ Easter.

So it went this year in the village of Valea Mare, on the Eastern bank of the river Prut, which has been separating Romania and Moldova for some 75 years now. People came and enjoyed themselves as they do, for a while at least – until the event was cut short by a furious rainstorm. Most caved to the bad weather and skipped the religious service, going home early.

But Liuba Andreevna and her niece Valea stayed and saw the ritual through. “God tested our resolve today,” Valea said at the after-cemetery feast held in Liuba’s house. Weaker relatives had been waiting for their return anxiously, while the two seasoned women braved the storm and completed the annual custom. In the terrible storm which scared away most punters, their spirits were as high as in the morning sunshine. Brandy and moonshine flowed between wry jokes and candid pieces of folk wisdom.

God has tested Moldovans a lot recently. Not many of their deceased would be happy today in the knowledge that their descendants have been robbed of a prosperous future and not much is being done to find the perpetrators.

Indeed, even as they celebrated Gentle Easter like protocol demands – it would be bad publicity to ignore it – many of the country’s politics and banking elite were thinking about the crisis they were in: a billion dollars had been stolen and fingers were being pointed at them for answers and justice. Moldova drew the attention of international press, something that rarely happens, and everyone seemed to wonder how could so much money be stolen and by whom? Answers are still scarce.

‘The heist of the century’ was discovered in November 2014 at three of the country’s biggest banks which collapsed financially – Unibank, Banca de Economii and Banca Sociala. Around a billion US dollars had been embezzled in rapid succession, amounting to 15 percent of gross domestic product for 2013 or just over half the state budget for 2014. The National Bank put the three institutions in special administration, the other option being insolvency and plunging the country into chaos. Upon state takeover, public funds filled the hole in a secret bailout deal.

Grant Thornton, one of the world’s largest accounting firms, has been auditing Banca de Economii and Unibank since 2011 and Banca Sociala since 2013. Documentation retrieved by me shows that Grant Thornton gave the unstable Banca de Economii and Unibank good bills of health for the years between 2011 and 2013, and Banca Sociala in 2013. It is the legal duty of an auditor to verify that reports presented by a bank to its stockholders are genuine, accurate and complete.

Another Moldovan bank audited favourably by Grant Thornton since 2010, Moldindconbank, was last year uncovered to have harboured a money laundering ring. More than 18 billion euros of tainted capital was laundered through Moldindconbank on its way to the single European market. 9.4 million euros of that money has been loaned to the far-right Front National party of France, which supported Russia’s annexation of Crimea in May 2014. A cousin of Vladimir Putin was found to have been involved directly in the affair, which UK and other authorities are still investigating.

I wrote about the affair for The Guardian newspaper in London. The story was also published in the international section of the printed edition.

Apart from the material that the space-constrained newspaper managed to publish, there was also a letter from 2012, from Grant Thornton boss (now Minister of Economy) Stephane Bride to the manager of Banca de Economii, which leaked into the local press showing that Grant Thornton Moldova was without doubt aware of widespread fraud at the bank as far back as then but nevertheless refused to put its foot down in public.

According to the provisions of the contract number 1204/15 from 30 April 2012 we have

finalised the interim audit of Banca de Economii. (The Bank)

We wish to draw your attention that an auditor who carries out an audit according to the International Standards for Audit (ISA) is responsible for obtaining reasonable assurance about the fact that the financial situations in their totality don’t contain significant distortions, either as a result of fraud or error. Because of the limitations inherent to an audit, there exists an unavoidable risk that some significant distortion of the financial situations won’t be detected, even in the conditions where the audit is planned and carried out properly, accroding to the ISA.

Following the interim audit we have identified a number of transactions to which we would like to draw the bank’s attention:

1. The credit given to OXIAUTO-TRANS SRL in the sum of EUR 2,500,000 (credit contract nr 06-06/1/79 from October 29th 2010);

2. The credit given to ALEGOR_COMERT SRL in the sum of EUR 2,300,000 (contract etc see file)

3 ditto file

4. ditto file

5. ditto file

According to the credit contracts the destination of the credits listed above is the procurement and import into the Republic of Moldova of merchandise and materials. Also, missing in the credit files are proof of import in Moldova (copies of customs declarations for the goods bought from the credited sources. In the credit files there are only documents for payment according to which the means of credit were transferred to the benefit of non-residents. According to our understanding these credits haven’t been used for the destination.

According to the data of the State Fiscal Inspectorate (website fisc.md) about the companies COMERT SRL, ARTBETON GRUP SRL and (not readable, see doc – another company name, nb) obtaining the loans weren’t registered as VAT payers. Also, according to the presented financial situations presented these debtors have had income above the threshold for registering for VAT payment (the declared activities are VAt taxable). According to our understanding there is a probability that the financial situations presented by these debtors do not contain real data.

In case a VAT non-payer imports in the Republic of Moldova goods that are taxable with VAT, he doesn’t have the right to write in his account the VAT sum paid for importation of the goods. According to our understanding there is the probability that the import transactions in the Rep. of Moldova of the goods taxable with VAT by the VAT non-payers ALEGOR -COMERT SRL, ARTBETON-GRUP SRL and SC CIOMEX PROD SRL) is lacking in economic sense.

The crediting means were transferred for the benefit of non-residents. We noticed common beneficiaries for several credits (SAMERDALE HOLDING LTD Cyprus and KELWAY TRADING Panama):

According to our understanding there is the probability that these debtors represent a group of people acting in common.

In the credit file SC CIOMEX PROD SRL there is a certificate about rolling in bank accounts released by BC EXIMBANK-GRUPPO VENETO BANCA SA. It is our understanding that this bank statement doesn’t contain real data.

In the situation of 30 december 2012 the debtors OXIAUTO TRANS SRL, ALEGOR COMERT SRL, PROACVACOM SRL and SC CIOMEX PROD SRL were registering backlogs to their credit payments.

For four out of the five credit described above the evaluation of the security was carried out by ACONA-IMOBIL SRL. From our knowledge of the real estate market the evaluation doesn’t contain real data.

The potential effects of inherent limitations of an audit are important especially in the case of distortion as a result of fraud. The risk of not detecting a significant distortion which resulting from fraud is bigger than the risk of not detecting a distortion as a result of error. The primary responsibility for preventing and detecting fraud belongs to the persons tasked with governing the bank as well as the management.

At the 30th os September the bank didn’t abide by the following demands of the National banks: minimum necessary capital, the sufficiency of the capital weighed against risk, the rapport between the sum of the ten biggest net debts to credit and total credit portfolio, net exposure of the bank to one person or group of persons acting in common and the sum of all great exposures. We cannot estimate the consequences and impact of these transgressions of the National bank rules over the bank as a whole and the financial situations.

Resulting from the above there is a great probability that there are other transactions which contain significant distortion. Because it’s impossible for an audit to detect all significant errors, we believe that in these circumstances an audit would not bring any benefits to the users of the financial situation of the bank. We propose to suspend the auditing of the bank and focus on the complete review if the credit portfolio.

In case we will continue the auditing process for the bank we would be forced to re-estimate our fee, because the hypotheses on which our initial effort was based, and our fee, are no longer valid. For details see the section titled Fees and Billing in the contract or in annex 1 to this letter.

In consequence we demand a meeting with the management of the bank to discuss the above mentioned.

Signed Stephane Bride”

It is unclear whether Grant Thornton obtained an increased fee following this letter but the next auditor’s opinion they gave for the bank certainly contains no mention of fraud…

9-7-2015 12:28am – correction: I edited the post to show that Grant Thornton Moldova actually started auditing Unibank in 2011, not 2010 as I wrote earlier. Apologies.